It’s earnings season!
The spotlight turns to the giants of the banking sector, with JPMorgan Chase and Wells Fargo leading the headlines with JPM giving investors a bit to chew on this morning. Net Interest Income (NII) rose 11% to $23.1Bn but that misses the mark set by analysts. The bank has adjusted its expense guidance upwards to about $91Bn (AI spending?) for the year, hinting at costlier days ahead. CEO Jamie Dimon flagged “significant uncertain forces” like persistent inflation and geopolitical tensions as potential spoilers. JPM shares are taking a 4% hit in early trading.
Meanwhile, Wells Fargo (WFC) reported a DROP in NII, down 8% year-over-year, reflecting muted loan growth and rising depositor demands for more interest. Despite this, total revenues still surpassed expectations, thanks in part to a spike in Investment Advisory Fees and Brokerage Commissions from all that money the Top 1% have been making in the markets. BUT it’s not all rosy; the San Francisco-based bank is feeling the pressure, with shares dropping 3% pre-market.
As you can see from the charts, both banks have been the victims of runaway expectations and between any signs of vulnerability and the Fed seeming less and less doveish – they were both ready for a pullback and this is just an excuse for traders to cash out.
Broader market sentiment is swaying under the weight of the Federal Reserve’s adjusted rate trajectory. While the Fed’s future moves are as clear as mud, great profit expectations can lead to great disappointments if not met and we also have to worry about forward guidance taking a step back in light of higher rate projections. Jamie Dimon just said that “persistent” inflation, “terrible wars and violence” and the Fed’s efforts to tighten financial conditions threaten an otherwise positive economic backdrop. “Looking ahead, we remain alert to a number of significant uncertain forces,” said the head of the the largest U.S. Bank.
Despite the strong economy, which is generally good for profits, the potential for fewer rate cuts could dampen the valuation of future earnings. It’s a delicate balance and the Fed might not have its usual rate-cut lever to pull if inflation remains stubbornly high.
As we pause to take the market’s pulse, Tech Stocks are still the day’s darlings, partially offsetting the banking sector’s jitters. Apple and Nvidia are shining bright after significant rallies, fueled by AI and new tech developments. AAPL just got a $1Bn slap in the wrist from the UK over their App Store issues and it will take them about 3 days to make that money back – that will show them!
As we round out the week, keep tabs on Citigroup (C) and other major banks set to report. Their outcomes could either fan the flames of worry or sprinkle some much-needed optimism. On the commodities front, Brent crude is over the $90 mark amid continuing Middle East tensions with rumors that Iran will attack Israel “any moment“. That makes /CL ($86.50) a bit too scary to short into the weekend, unfortunately.
Meanwhile, Gold (/GC) still glitters at $2,418, with investors flocking to its safe embrace amid the market uncertainty. You’re welcome for our Top Trade Alert on Feb 7th to buy Barrick Gold (GOLD) when it was still $15.02 and our net $100 credit on thee $8,000 spread is already at net $2,000 and, though we still have 300% left to gain – we’re already up $2,100 (2,100%), which is pretty darned good for 2 months, right?
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For you crypto enthusiasts, Bitcoin is holding steady above $70k into its “Halving Event” despite the Dollar holding up just under 106 this morning – but that will not be so great for the indexes so – be careful out there…
Today’s market landscape is a complex tapestry of high stakes earnings, geopolitical drama, and economic indicators that could sway the scales in any direction.
